The Institute of

Chartered Accountants
of Pakistan

TERMS OF REFERENCE (TOR) OF THE ICAP

AUDIT COMMITTEE
Approved by the Council in its 288th meeting held on July 7-8, 2017
 Terms of Reference
of the ICAP Audit Committee

1. The Council has resolved to establish a Committee to be known as the Audit Committee
(referred to as Committee). The Committee assists the Council in fulfilling its oversight
responsibilities in respect of:

1.1. Integrity of financial statements;

1.2. Risk management & internal controls system;

1.3. Compliance with legal & regulatory requirements including Council Directives;

1.4. The performance, qualifications & independence of External Auditors; and

1.5. The performance of the Internal Audit function.

2. Membership

2.1. The Committee shall comprise five members with a minimum of three independent
members and two Council members not being Office Bearers.

2.2. The Chairman of the Committee shall be a Past President of the Institute. The Committee
will be appointed for a period of two years.

2.3. Chief Internal Auditor and Executives of the Institute may be invited to attend part or the
entire meeting.

(For the purposes of these Terms of Reference, Executives of the Institute means
Executive Director, Secretary, Head of Finance, any Director or Head of Department
whether working full time or part time with the Institute)

2.4. The Chief Internal Auditor or any other person nominated by the Committee shall act as
Secretary to the Committee.

2.5. Committee Secretary, Executives of the Institute or Chief Internal Auditor will not be
eligible to vote.

3. Meetings

3.1. The Committee shall meet at least four times in a year, with authority to convene
additional meetings as circumstances require. Two meetings shall coincide with
consideration of the half-year and full-year results announcements. Meetings may be called
by any member of the Committee or the Committee Secretary.

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 3.2. A quorum for meetings of the Committee shall be at least three members with at least one
independent member present in person.

3.3. Members of the Committee may participate in a meeting by teleconference or video

conference. A person so participating is deemed to be present in person at the meeting and
shall be counted in a quorum accordingly.

3.4. The Committee shall meet with the Institute’s External Auditors at least on two occasions
in a year and hold at least one such meeting with the External Auditors in the absence of
Executives of the Institute and Chief Internal Auditor.

3.5. The Committee may call Executives of the Institute to attend its meeting on case to case
basis.

3.6. The External Auditors and Chief Internal Auditor may require a meeting with the
Committee whenever deemed necessary.

4. Responsibilities

4.1. The Secretary shall circulate the minutes of meetings of the Committee to all members of
the Council.

4.2. The Chairman of the Committee or any other independent member of the Committee
authorized by the Chairman shall attend the Institute’s Annual General Meeting and will
be available to respond to questions regarding the work of the Committee.

4.3. The duties of the Committee shall be:

i) The integrity of Financial Statements:

a) To monitor the integrity of the interim and annual financial statements of the
Institute and compliance with accounting standards and legal requirements.

b) Review major accounting and reporting issues, including any significant changes in
accounting policies and principles.

c) To review the financial reporting process.

d) Review of practices with regard to release and publication of financial information.

e) To consider any other issue or matter as may be assigned by the Council.

ii) Risk Management & Internal Control Arrangement:

a) Review the effectiveness of Internal Controls.

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 b) Review major areas of risks identified by the management or by the Internal and
External Auditors.

c) Determination of appropriate measures to safeguard the assets of the Institute.

d) To monitor compliance with the best practices of Corporate Governance and

identification of areas for improvement there-in.

e) To monitor the effectiveness and compliance of the Whistle Blowing Policy of the
Institute.

iii) Internal Audit Function

a) Recommend appointment and replacement of Chief Internal Auditor for the

approval of the Council.

b) To evaluate Internal Audit performance.

c) To review and approve Annual Internal Audit Plan and monitor its
implementation.

d) To direct Chief Internal Auditor to perform specific tasks.

e) Review Internal Audit Charter and make recommendations to the Council for any
amendments therein.

f) Review actions taken to resolve key issues identified by the Chief Internal Auditor.

g) Assess HR needs of the Internal Audit department at the request of Chief Internal
Auditor and to recommend budgets.

h) At least once a year the Committee shall meet the Chief Internal Auditor and other
members of the Internal Audit function without the presence of Executives of
Institute and the External Auditors.

i) The Chief Internal Auditor will report functionally to the Chairman of the
Committee and administratively to the Secretary.

iv) External Auditors

a) To make recommendations to the Council, for approval in general meeting, in

respect of matters relating to the appointment of External Auditors, their re-
appointment or removal.

b) To discuss issues arising from the work of the External Auditors including
management letter or any other communication and management response
thereto.

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 c) To ensure that there are no unsettled issues of significance between management
and the External Auditors which could affect the underlying accuracy of the
financial statements.

d) To discuss any unadjusted differences identified during the audit.

e) To develop and implement policy on the engagement of the External Auditors to

supply non-audit services, taking into account applicable guidelines issued by the
International Federation of Accountants (IFAC) with regard to restriction of non-
audit services.

f) Institute shall not appoint External Auditors who are non-compliant with the
IFAC Guidelines on Code of Ethics, as applicable in Pakistan.

v) Compliance review of IFAC Statement of Membership Obligations (SMOs)

a) To evaluate the strategy and Standard Operating Procedures (SOPs) formulated

for implementation of IFAC SMOs.
b) To review of compliance/ implementation status of each SMO and action plans
there against.
5. Communication and Performance Evaluation

5.1. The Committee will communicate to the Council an update on every meeting of the
Committee.

5.2. The Committee shall review these Terms of Reference on an annual basis and confirm that
all the responsibilities set out in the current Terms of Reference have been carried out.

5.3. The Committee shall prepare a report for members of the Institute for inclusion in the
Council’s Annual Report and Accounts.

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